AN APPRAISAL OF THE COST MANAGEMENT PRACTICES IN THE DELIVERY OF CAPITAL PROJECTS IN NIGERIA

ABSTRACT
This study appraises the Cost Management Practices in the Delivery of Capital Projects in Nigeria with set objectives of (i) Identifying and assessing the courses of ineffective cost management practices in delivery of capital projects., (ii) Identifying and assessing the effect of ineffective cost management practices in the delivery of capital projects in Nigeria and (iii) proffering of solution to the problems. Relevant texts, journals, personnal interviews and administered questionnaires were used to obtain data from the stratified randomly sampled population. A total of sixty seven questionnaires were administered to respondents and fifty were returned making a 75% response rate.

The questionnaires were structured and administered in the following order. Architects-5numbers, Builders-9Numbers, Quantity surveyors-17Numbers. Mechanical Engineers-4Numbers, Electrical Engineers-4Numbers, civil/structural Engineers-17Numbers, others-17Numbers. The percentile grading and Relative importance index and mean score statistical techniques were used to analyze the data collected. The analyzed data formed the bases of the findings (i) Lack of continuity in government and corruption (causative factors) abandonment of projects and extra budgetary (effects) and (iii) reduction and corruption practices by government and accountability in Government circle (solution) and these further led to the major recommendation that Government should endeavour to reduce corruption practices as it is associated with the cost Management and Delivery of capital projects in Nigeria.

CHAPTER ONE
INTRODUCTION
1.0  BACKGROUND OF THE STUDY
Procurement of Capital projects in Nigeria has become a source of worry to both Government and Private sector developers as it is evident from the recent outcries of unfavoured professional group(s) of the construction industry in the inclusion exercises into the National Council on Public Procurement. This Council has had some of these set cardinal objectives as follows;

i.                    the establishment of pricing standards and setting bench mark
ii.                  enduring the application of fair, competitive, transparent, value for money standard and
iii.                the attainment of transparency, cost effectiveness and
professionalism in the public sector procurement system.

According to Onyeri (2008):

“The latest survey conducted by the World Bank on procurement activities prior to the enactment of the 2007 Act; that bribery and corruption dominated Nigeria’s N775 billion contract award in 2007. In fact the survey did not tell us anything that we are not aware of. We have always known that the system of
procurement in this country is fraught with corruption and corrupt practices”

The above statement in direct terms, confirms the belief that there is problem in the cost management practices (if any) adopted in delivery of capital projects in the country and this projects ranges from mass housing projects through highways and road infrastructures, other civil engineering works and industrial engineering construction works.

According to (Adetola, 2007):

It is very disturbing to know about 90% of the road contracts awarded by various levels of government in Nigeria is done through only one professional grouping – “Engineering” who designs, estimates the cost of construction, makes payment and contracts. It is the situation and arrangement that forces former Minister ofWorks, Senator Ogunlewe to verbally attack the engineers in a public hearing on the Procurement Act.

The professional businesses in the construction industry needs to be better and equitably distributed for improved and specialized handling.

According to Ogunlewe (as cited in Adetola, 2007):

We are talking of due process, shouting due process. What is due process? In the Federal Ministry of Works where I preside as the minister, I
don’t believe there is anything that is due process. How can there be due process when the engineers designs the roads, estimates the costs of the roads, settles the contractor, construct the road, supervises the construction, recommend payment for work done, approve the payment certificates and the quality of work! All these by one person! Haba! This cannot be due process. Not until roles are assigned to relevant professionals like the quantity surveyors to be in charge of cost and cost management of roads and highways, can there be any due process in Federal Ministry of Works.

The statement of the Senator does not only depict emotional attachment towards resolution of the problems, but also it substantially exposes possible areas and ways of resolving the problem from his own angle of perception.

According to Oforeh, (1997): “The Nigerian construction industry contributes at least 60% to the Nations yearly Gross Domestic Products (GDP)”,

The implication of this statement when married to the other points on cost management discussed above is that any problem in the cost management of capital projects within the construction industry is a major problem to the Nigerian economy and the people and this should be taken serious.

1.2  PROBLEM ANALYSIS
Cost management of capital projects in Nigeria is poor and demands urgent attention. This is obvious from incessant abandonment of capital projects (Elephant Projects – Ajaokuta Steel Rolling Plant to mention a few).

Complaint of cost overrun of capital projects and a host of other cost related and disturbing issues.

Fair-enough, there is no doubt that mush words have been undertaken in recent years in at least proffering solution to the menacing problems of poor cost management of a capital projects as it is evident form the consistent dramatized effort of government and the scholarly works of eminent professionals and educationists in this area. Notably among these works are those of Mogbo (2000) “The procurement and financing of roads in Nigeria through new private sector and Government initiatives and that of Oladapo (2000) “Cost management of engineering infrastructure”

Notwithstanding these efforts made so far, much is yet to be desired particularly in area of efficient and effective cost management of those projects, hence the need to identify the problems constraining the efficient cost management of capital projects

i.                    Late appointment of quantity surveyor in the delivery of capital projects will certainly lead to ineffective cost management practices.

ii.                  Non appointment of quantity surveyor in the delivery of capital projects will certainly lead to ineffective cost management practices.

iii.                Inadequate budgeting at the inceptional stages of project delivery will lead to ineffective cost management practices.

iv.                Inflation during the period of capital project delivery can lead to ineffective cost management practices.

v.                  Lack of optimized concurrent professional engineering environment in the delivery of capital projects (industrial engineering construction in particular) will lead to in effective cost management practices.

vi.                Inadequate funding of capital projects can lead to ineffective cost management practices.

vii.              Corruption will obviously lead to ineffective cost management practices in the delivery of capital projects.

viii.            Political instability will lead to ineffective cost management practices in the delivery of capital projects.

ix.                Lack of continuity in government can lead to ineffective cost management practices in the delivery of capital projects.

x.                  Ignorance on the part of client will cause ineffective cost management in the delivery of capital projects.


xi.                Client’s contractual negligence will lead to ineffective cost management practices in the delivery of capital projects.

xii.              Unanticipated increase in interest rate during the period of capital project delivery will lead to ineffective cost management practices.

xiii.            Lack of cost risk analysis in delivery of capital projects (industrial engineering construction works in particular will lead to ineffective cost management practices.

xiv.            Lack of cost control exercises at pre-contract stages of project delivery will lead to in-effective cost management practices.

xv.              Lack of value analysis will lead to inefficient cost management practices in the delivery of capital projects.

xvi.            Lack of value engineering will lead to inefficient cost management practices in the delivery of capital projects.

xvii.          Lack of proper monitoring by cost managers and cost engineers at construction phase of capital projects’ delivery will lead to ineffective cost management practices.

xviii.        Poor project management will lead to ineffective cost management in the delivery of capital project.

1.3       AIM AND OBJECTIVES
AIM
The aim of this study is to appraise the general cost management practices available in the delivery of capital projects in Nigeria.

OBJECTIVES:
The set of objectives in achieving the above mentioned aim is as stated below:

i.                    To identify and assess the causes of ineffective cost management practices in the delivery of capital projects in Nigeria.

ii.                  To identify and assess the effect of ineffective cost management practices in the delivery of capital projects in Nigeria.

iii.                To proffer solution to the problems.

1.4       RELEVANT RESEARCH QUESTIONS
i.                     How can early appointment of quantity surveyor in the delivery of capital project bring about effective cost management practices?

ii.                     How can correction of attitude of Non inclusion of quantity surveyors and cost engineers in the delivery of capital projects bring about improved cost management practices?

iii.                     How can adequate budgeting for proposed capital projects bring about improved cost management practices?

iv.                      Do you consider tackling of inflation as a way of bring about improved cost management practices in the delivery of capital projects?

v.                     How would optimized concurrent professional engineering environment bring about improved cost management practices?

1.5 DEFINITION OF TERMS AND CONCEPTS
Optimized concurrent engineering: An environment that  provides opportunity to  substantially reduce the total cost of a project through integration of construction / engineering product teams, containing members of various skilled disciplines, enabling a simultaneous contribution to an early product development and definition.

Valued Analysis: It involves the analyses of a product with respect to product process cost and it is typically a technique used on existing items/products in light of a new processes, materials or assembly method being available.

Value Engineering: It is an approach that vigorously examines the relationship between a product function and cost and can be used during the concept stage of a product development.

1.6       SCOPE AND LIMITATIONS OF THE STUDY
This study focuses on construction industry professional practicing firms, clients of the industry (public and private), selected industrial engineering construction companies, and construction and engineering manufacturing firms.

These were some of the extraneous and constraining circumstances that created imperfection in the study

·      Finance was one of the main constraining factors in this study as there was not enough funds to carry-out and supervise the field work as the researcher would have expected,

·      The researcher is based in Lagos and had time-problem to fully follow-up personally and supervise the administration of the questionnaire to respondents. The researcher was not available all the time and so friends and colleagues helped out to the best of their ability.

·      Some of the respondents did not comply to instructions and requests as expected.

1.7  SIGNIFICANCE OF THE STUDY AND JUSTIFICATION FOR INVESTIGATING IT
This thesis examines the causes and impacts of ineffective cost management practices in the delivery of capital projects in Nigeria with a view to proffer solution to these problems.

However, the significance of the study is to enlighten the government and prospective private sector clients on the observed associated problems of cost management practices in the delivery of capital projects and ways out of the problems when investigating them.

It will equally educate the would-be clients on their contractual obligations when embarking on such projects. It will also highlight the need for and appointment of proper professionals when embarking on such projects.

It will highlight the accruing benefits to proper cost mismanagement of capital projects.

The result of the research will aid government, their respective agencies and concerned private sector developers in revisiting existing and on-going projects that are presently suffering from these professional/technical denials. The result of the research will equally help the different professional actors to know about the parts they are expected to play at strategic periods of capital project delivery with special regards to cost management practices.

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Item Type: Project Material  |  Attribute: 130 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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